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Winners and losers


When the Federal Reserve meets, we all have questions: What does it mean to me? Will my mortgage rate go up or down? Is this a good time to refinance? Bankrate is here to help. We've looked at five categories -- mortgages, home equity loans, auto loans, credit cards and certificates of deposit -- to determine if the Fed's moves made you a winner or a loser. Here's a look at mortgages:

Winner: Home shoppers

Hardly a week passes without new predictions of impending economic disaster in the United States.

However, all that gloom and doom obscures one bright spot: Now may be a great time to buy a house.

"Values are incredible right now," says David Kuiper, a mortgage planner at First Place Bank in Holland, Mich. "Buyers have a lot of inventory at very attractive prices to choose from."

Sinking mortgage rates and new tax incentives for first-time buyers (such as a tax credit of up to 10 percent of a home's purchase price, up to $7,500) are additional sweeteners that make the prospect of buying a home irresistible for some.

If you have sound finances, a secure job and an extended time horizon, it may be time to call a real estate agent.

 Winner: Homeowners hoping to refinance

In January, mortgage rates fell to multi-decade lows before rising the next month. Ever since that time, homeowners have waited in vain for rates to fall again.

Until now.

The Nov. 25 announcement that the Federal Reserve would buy up to $500 billion of securitized loans caused mortgage rates to plunge. In recent weeks, they have hovered near 45-year lows, making now a great time to lock into a mortgage rate.

Some homeowners likely will continue to hold out for even lower rates. But that could be a mistake. "The risks of rates increasing far outweigh the chance that rates will go lower," Kuiper says. "If it makes sense today, go for it."

 Loser: Homeowners in special circumstances

Although mortgage rates are sinking, certain groups of homeowners hoping to refinance may be on the outside looking in.

Homeowners who are underwater on their mortgages or who have credit scores under 680 are likely to have a very difficult time refinancing, says Dan Green, a Certified Mortgage Planner based in Cincinnati who works for the Mobium Mortgage Group.

As credit continues to tighten, refinancing prospects will dim for homeowners whose monthly debts exceed 45 percent of their income and homeowners hoping to refinance investment properties.

"Low mortgage rates are terrific, but they're available to a dramatically shrinking number of homeowners across the country," says Green, who is also author of TheMortgageReports.com.

 Take action

In recent months, sinking home prices have made housing increasingly affordable for shoppers.

Now, falling mortgage rates are adding extra incentive to secure a new mortgage.

Whether you're looking to buy a new home or to refinance an existing loan, this is a great time to lock into mortgage rates that are near 45-year lows.

You can use our handy mortgage calculator to determine what your monthly mortgage payment would be if you bought or refinanced a home.

-- Posted: Dec. 16, 2008

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